The Affordable Care Act (ACA) improved insurance affordability and access for all Americans, including those eligible for Medicare, Medicaid, and private coverage offered through the health insurance marketplace. It strengthened Medicare in many ways — by closing the Part D prescription drug doughnut hole, offering free preventive services, and extending the life of the Medicare trust fund. However, the ACA’s improvements to Medicaid and private market insurance highlight longstanding shortfalls in programs that assist low-income Medicare beneficiaries with their health care costs.
While these programs provide needed relief to some Medicare beneficiaries, federal and state governments can take steps to improve what these programs cover and the number of people they reach (our fact sheet explains this in more depth). Policymakers can look to the ACA’s more generous eligibility standards for private insurance premium tax credits and cost-sharing subsidies as they seek to improve programs that serve Medicare beneficiaries.
This post looks at Medicare’s income and asset eligibility levels for low-income assistance programs in the context of the financial assistance that is available to non-Medicare beneficiaries. Especially when compared to expansion Medicaid, low-income Medicare beneficiaries need greater protection from out-of-pocket costs. Our related infographic provides a side-by-side comparison of the financial assistance that is available to people with Medicare and compares that assistance to that which is provided through expanded Medicaid or the health insurance marketplace. Our brief, Four Strategies for Improving Programs that Help Low-Income Medicare Beneficiaries with Health Care Costs, outlines in detail how state and federal policymakers can improve Medicare low-income programs.
Medicare’s high out-of-pocket expenses make the programs that help low-income beneficiaries with out-of-pocket costs more critical than ever before
Medicare provides vital and generous health insurance for seniors and people with disabilities, but out-of-pocket expenses can be high for consumers who don’t have supplemental insurance coverage, especially if they need a lot of medical care. By way of example, the average Medicare household spends 14 percent of its income on health care costs, compared to only 5 percent for non-Medicare households.
Medicare beneficiaries can get help with their out-of-pocket health care costs, but the programs that help low-income beneficiaries with those costs have strict income and asset guidelines:
- Only people with incomes below 150 percent of the federal poverty level and who have limited assets are eligible to receive any kind of financial assistance. For example, a Medicare beneficiary with income at 140 percent of poverty will be eligible for only limited assistance to help pay for her Part D drug plan premiums and co-insurance. She will get no assistance with her Part B premiums or her Part A and B cost-sharing.
- Only those with incomes below 100 percent of poverty and very little savings (less than $7,000 for an individual and $11,000 for a couple) are eligible to receive financial assistance with their Part A and B out-of-pocket costs (see our fact sheet on filling the gaps in Medicare).
Further, Medicare households with incomes between 150 and 200 percent of poverty can have a particularly hard time paying their premiums. A married couple in this income range with Medicare is not eligible for any financial assistance. A non-Medicare couple who buys health insurance through the marketplace and gets a premium tax credit would see their premium costs limited to between 4 and 6 percent of income after tax credits.
Medicare beneficiaries have stricter income and asset eligibility thresholds in order to qualify for Medicaid and financial assistance
Expanded Medicaid and premium tax credit and cost-sharing subsidies for private marketplace insurance have more generous income and asset limits. They can serve as a model for how to improve Medicare low-income programs.
- Individuals in the health insurance marketplace with higher incomes (up to 400 percent of poverty, which amounts to about $47,000 annually) get sliding-scale premium tax credits to help pay for premiums. The amount of premium costs that a person pays is capped based on his or her percent of poverty.
- Individuals with slightly lower incomes (up to 250 percent of poverty, which amounts to about $29,000) are also eligible for cost-sharing subsidies that help lower their out-of-pocket expenses (for example, for a copayment for a doctor visit or a prescription).
Medicaid expansion (for the 26 states that have chosen that option) offers help for individuals with incomes that are even lower (below 138 percent of poverty, which is about $16,000), and there is no asset limit. The expanded Medicaid program provides comprehensive health insurance with very low or no monthly premiums and limited cost-sharing (deductibles, copayments, and co-insurance).
And in contrast to Medicare, eligibility for marketplace and expanded Medicaid coverage and financial assistance (premium tax credits, cost-sharing subsidies) is limited to income and does not factor in assets (a family’s savings).
Two reasons why increasing Medicare’s income and asset limits will improve the financial security of households already strained by high out-of-pocket expenses and ease their transition into Medicare
There are several improvements that Congress and states can make to programs that help low-income Medicare beneficiaries.
- Increasing income and asset limits will allow more low-income people to qualify. Increasing eligibility requirements for traditional Medicaid and Medicare low-income programs (those that defray the costs of care) will improve the financial security of Medicare households who are already strained by high out-of-pocket health care expenses.
- Raising these income and asset limits will also help guard against increases in out-of-pocket costs for low-income health care consumers as they enroll in Medicare. Because the subsidies that are provided in the marketplace (and through expanded Medicaid) have more generous income and asset thresholds than those for Medicare beneficiaries, consumers who move from marketplace coverage or expanded Medicaid into Medicare may face gaps in coverage or unanticipated increases in out-of-pocket costs. This is especially true for people in expanded Medicaid and for individuals with incomes below 200 percent of poverty.
Increasing income and asset limits for the Medicare Savings Program and the Part D low-income subsidy would help mitigate this problem.